An Saoi: At an initial examination the April figures appear to be very good. However, at closer examination I think that there are a number of specific reasons - administrative and technical - explaining why the underlying figures tell another story.
The Income Tax figure looks excellent at first view. However, the estimate for April appears to have been far below the underlying liability. March involved five pay weeks for those paid weekly, and three pay fortnights. The estimate was just €1,080M - just €100M over the previous month, while €1,271M was actually paid. The profiler clearly did not get out his diary and calculate the full effect of the additional pay weeks.
Bi-monthly VAT returns are not due in April and the net VAT paid for April was €287M well in excess of €205M profiled. This is probably a reflection of delays in VAT repayment claims due to staff shortages, rather than additional taxes paid. The Revenue does not publish any details of repayment claims on hands at the end of the month therefore we can only guess what the actually position is. There have been strong rumours that the Revenue has been staggering large repayments over a longer period because of staffing and cashflow problems. The real test will occur with next month’s figures, which will include the March/April VAT returns. March spending on credit cards published by the Central Bank last week reflected very poor consumer activity in the month, and suggests that the VAT returns will be poor. Add to this the processing of the balance of the repayment claims arising from earlier periods and
Corporation Tax for the month was on target and remains ahead of target. May is a crucial month for Corporation Tax. Companies with account years ending 30th November & 30th June must make payments. In Ireland this includes Microsoft, Pfizer, Oracle & Diageo (Guinness). Last month I commented as follows on Corporation Tax,
“Little or no Corporation Tax is now paid by Irish owned businesses, while a very small proportion of the net yield is accounted for by those multi nationals actually trading in the Irish economy, e.g. Vodafone & O2. The increase in yield from Corporation Tax reflects the activities of multinationals in Ireland, using Ireland as their point of sale for goods and services. The annual target for Corporation Tax of €4,020M is likely to be comfortably exceeded. The net target for March was just €10M compared to €111M actually received. Such a monthly discrepancy needs some explanation, which was not forthcoming from Dept. of Finance.”
Corporation Tax bears no relation to actually Irish economic activity rather it is paid by multi-nationals for Ireland facilitating their activities.
Excise, which includes VRT is slightly below target in April (€406M versus profile €420M), however remains slightly ahead of target. Ongoing car sales are helping to keep figures up. The real test will occur after 30th June and the scrappage scheme ends. The continuing collapse of major garages such as Maxwell Motors would suggest that without this crutch, trade will collapse in the second half of the year.
Customs Duties are collected by the Irish Revenue on behalf of the European Union. The increase in yield is down to large multi-nationals using Ireland as their point of entry on imports from outside of the European Union and is irrelevant to the Irish Exchequer.
I made a technical error last month in relation to CAT which of course was brought into the pay and file system in Finance Act 2010. We will therefore have to wait until later in the year before we can make any real comparison. Stamp Duty & CGT are both running marginally below their very low targets.
However, I would hold with my tentative projection of March, which you can access here. Real cutbacks have not yet been felt, despite what people may think. Substantial losses of jobs will continue in the Public Sector and in Construction. The May figures should enable us to make more confident predictions for the final outcome.